FOREST CITY | An upgrade to Forest City's aging electrical system is expected to begin this spring. 

The city has received a report from DGR Engineering, which was commissioned to evaluate the city's electrical system.

DGR has recommended a 10-year capital improvements plan.

Earlier this month the city council entered into a $118,800 engineering agreement with DGR for a portion of the first phase of the improvements plan.

The estimated cost of this portion, which involves construction of electric distribution improvements in the northern portion of the city, is $1.1 million.

City Administrator Barb Smith said the council has not committed to the other three portions of the first phase of the project, or any portions of the second or third phases.

"We are going to take it one step at a time," she said.

The total cost for the first phase is expected to be $4.2 million. 

The second phase of the plan would cost $3.5 million. 

The third phase carries an estimated price tag of $7.1 million.

Some portions of the city's electrical system are out of date, according to Smith. 

"There are updates that have been put off for a few years," she said. "It's work that definitely needs to be done."

The city plans to use revenue bonds to pay for the project. 

Smith said work on the upgrades will begin this spring after a contractor is chosen through a bidding process. The revenue bonds will be sold after the end of the current fiscal year. 

DGR recommends a bonding structure of $3.5 million for the first phase, $7.4 million for the second phase and $4 million for the third phase.

In order to accommodate the debt service payments related to the improvements in the first phase, DGR recommends the city raise electric rates by 4 percent for the fiscal year that begins July 1, 2018. 

After that the city has the option of not raising electric rates for a few years before beginning to raise them again, or raising the rate each year but doing so in smaller increments.  

The average increase in revenue for the city is expected to be less than 2 cents per kilowatt hour over the next decade. 

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